ARE 100B - Midterm 2 Key, version D

ARE 100B - Midterm 2 Key, version D - ARE 100b M Whitney...

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ARE 100b M. Whitney Spring 2009 YOURNAME: __________________________________ _ SECOND MIDTERM This exam has two sections. Section A consists of 10 multiple-choice questions, each worth 10 points .. Total possible points in Section A = 100. Section B consists of 5 problems each worth 30 points. Partial credit is given for correct approach even if final answer is incorrect, so show your work! Total possible points in Section B = 150. Total points in this exam: 250
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SECTION A Multiple choice--10 points each 1. Suppose two firms, A and B, have formed a cartel. Their cost functions are: . TCa = 12 qa +.1 qa"2 TCb = 16 qb + .05 qb"2 If you observe that firm A is producing 50 units, what else do you expect is true? a. Price is $22. b. Firm A's ATC is $22. @ Firm B's ATC is $19. a. All of the above. e. None of the above. 2. Three prospective bidders attend an American or English-style auction. Their reservation prices are. Buyer A= $200; Buyer B= $190; Buyer C = $185. The bidding increment is $5. What is the likely outcome? a. Buyer A will win the bid and pay $195 b. Buyer A will win the bid and pay $190. ©Either a or b. d. Not enough information to tell, since bidders have an incentive to hide their true reservation prices. 3. Suppose we observe a firm selling a good at P < MC. What market behavior is consistent with this practice? a. Predatory pricing. b. Ex ante competition, ex post monopoly. @; Either a or b. d. Neither a nor b. Questions 4 and 5 refer to the payoff matrix below: Player 2 Player 1 (6, -10) (4,3) (4,5 ) (3,2) (7,6) (5, 7) (3,5) (5,6) (6,8) 4. Which, if any, player has a dominant strategy in this game? a. Player 1 @Player2 c. Both players d. Neither player 5. How many Nash equilibria in pure strategies exist in this matrix? a. None ~One 'e:! Two d. Three
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6. What is the difference between market price under (i) Bertrand oligopoly, and (ii) perfect competition? Assume all fIrms produce homogeneous (not differentiated) goods. a.
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This note was uploaded on 11/19/2009 for the course ARE ARE100B taught by Professor Chenguang during the Spring '09 term at UC Davis.

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ARE 100B - Midterm 2 Key, version D - ARE 100b M Whitney...

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